By Shalmali Guttal
April 25, 2002
In its 1999 policy on governance, the Asian Development Bank (ADB) states, “The term ‘governance’ means different things to different people.” In relation to the ADB, this is certainly true. The ADB’s forays into good governance over the past few years clearly show that what governance means to the ADB is quite different from what it means to millions of people in the Asia and Pacific region, who are unfortunately under its financial (and governance!) umbrella.
For most people, precepts of good governance would imply publicly accountable systems of rights, entitlements, laws, rules, distribution/use of resources, decision making, etc., that are based on universal principles of equality, equity, and justice, but which at the same time, allow for the cultural specificities of a society or nation. For the ADB, however, governance is about putting into place the required policy environments and structures in its Developing Member Countries (DMCs)–who are also its debtors–to ensure the success of ADB financed programmes.
By its own admission, the ADB’s approach to governance is “economic” rather than “political;” i.e., the Bank regards good governance from the perspective of “efficient management of public resources” and “sound development management.” Accordingly, good governance is about “effective management” of the development process and encompasses the functioning and capability of the public sector, and the rules and institutions that provide a framework of conduct for government, public enterprises, private business and corporations. Although its policy states that “governance is about the institutional environment in which citizens interact among themselves and with government agencies/officials,” the policy neither discussed, nor recognises a meaningful role for citizens in governance processes, frameworks and mechanisms.
The ADB does, however, articulate in considerable detail what governments–as “economic development managers”–must do in the area of good governance. The ADB claims a “legitimate and direct interest in governance issues” because of its involvement in the economic development of its DMCs. Its framework for governance both, arises from and supports, its development ideology.
Getting it Right
The ADB is a market fundamentalist in its economic and development approaches. Its poverty reduction strategy is based on unshakable beliefs in the wonders of rapid economic growth, financial liberalisation, privatisation, deregulation and increased market “openness.” By adding the phrase “pro-poor” to its usual range of operations, it seeks to justify its efforts towards private sector and market expansion. For example, the stated purpose of a conference in March 2002 on privatised infrastructure development was to: help disseminate information on “pro-poor infrastructure development by the private sector,” showcase lessons on “pro-poor contract design regulation and reform processes,” and discuss current thinking on “pro-poor reform policy in infrastructure development.” Appropriately, the conference was titled “Private Solutions for the Poor.” It is extremely unlikely though, that the poor themselves were present at the Conference.
The Bank’s governance policy–which is considered an integral component of its poverty reduction strategy– is in effect, a master plan of strategies, directions and actions that borrowing governments must follow in order to ensure the supremacy of market processes, structures and mechanisms in all aspects of social and commercial life. This is no secret and the ADB is makes its ideas on the correct place for government, the public sector and private enterprise in economic development quite clear:
“In a market-oriented economy, the government has the obligation to see that markets function efficiently and that the playing field is level for all participants…..Market regulation by the government should ensure that the operating rules do not discriminate between individual participants or interest groups.”
The ADB’s approach to governance poses serious threats to preserving autonomy and sovereignty in national policy making. While the Bank claims that its principal activity is project lending, it argues that weak implementation capacity and poor sectoral policy frameworks in borrowing countries can negatively impact technically sound and well-designed projects. Therefore–the Bank argues–it undertakes programme or policy based lending to complement its project financing activities. Such program loans cover a range of activities, from local and sectoral studies to developing plans and strategies for the reforms of entire sectors (for example, judicial, administrative, transportation, agriculture, education, etc.). According to the ADB:
“These efforts at helping DMCs ‘get policies right’ are now commonplace in the Bank, and have led it to take greater interest in the capacity of borrowing governments for policy formulation and implementation. While the policy objective in a particular DMC sector might be clear enough, knowledge of the institutional framework and its capability will be helpful in the design of reform measures.”
In other words, “good governance” provides the ADB with an effective and legitimate window though which it can institutionalise the reforms needed to firmly establish market capitalism among its DMCs. This involves writing new laws and regulations, developing new administrative and management systems, creating new positions and roles within government, institutionalising new decision making processes and in fact, doing whatever is required to ensure that the DMCs stay firmly on the path of market-led economic growth.
Hiding Behind the Charter
The ADB’s charter prohibits it from “interference” in the political affairs of its members and from being influenced by the political character of its members. Under Article 1 of the Charter, the purpose of the Bank is to foster economic growth and cooperation in the region, and the Charter clearly gives primacy to “economic considerations” in the carrying out of the ADB’s purpose and functions. By its own admission, however, the term “economic considerations” has been “widely interpreted” and ADB programs extend to any area that is deemed to have “economic effects.” Accordingly, the Bank’s governance agenda too has extended into such diverse areas as the environment, education, health, judicial systems and women’s empowerment.
On the other hand, the ADB is not quite as willing to recognise the political consequences of restructuring national policy environments that form the core of it governance programmes. While it is true that social and environmental programmes have economic effects, all programmes, economic or social, also have political effects.
Numerous examples can be found in the region where the access and rights of people and communities to crucial resources and opportunities have either been severely restricted, or lost altogether as a direct consequence of ADB supported projects and programmes. Policy prescriptions such as enhanced cost recovery for health, education and public utilities, water user fees in irrigation systems, the rationalisation (downsizing) of civil service sectors, creating “flexibility” in labour markets, and the privatisation of public sector enterprises, have resulted in the disempowerment and marginalisation of large numbers of people across the region. The ADB’s strategy of “pro-poor growth” has encouraged governments to freeze minimum wages and withhold the rights of workers to association, benefits and protections. In countries such as Pakistan, India, Thailand and the Philippines, protests against ADB projects and programmes have resulted in social unrest and divisions, and at times, even political harassment of those who protest.
Since the ADB’s framework of governance does not discuss the political dimensions of governance, it shows little interest in the fact that its own projects and programmes may violate the constitutional rights and democratic spaces of citizens. Too often, reform regimes imposed by the ADB have acted as barriers to the accountability of governments to their own citizens, and to the protection of broad based public interest. The transformation of public sectors to serve corporate and market interests in the guise of “efficient management of public resources” undermines the obligations of governments to provide appropriately and sufficiently for their citizens. It also creates new vulnerabilities, especially among those who are already income poor and politically marginalised. Not only has the ADB not accepted its culpability in these consequences, but also, it has consistently hidden behind the privileges that its Charter provides and assumed a politically neutral face.
The ADB has taken much of its content and operational strategy regarding good governance from its sibling institution, the World Bank. Inspired by the World Bank’s “global experience with project and adjustment lending,” the ADB feels confident in positioning good governance as “sound development management” necessary for “ensuring adequate returns and efficacy of the programmes and projects financed.”
The World Bank’s Charter also prohibits it from engaging in political activities and directs that decision-making be based on economic considerations alone. But given the emerging track record of poor management and project quality, negative project and programme impacts, and allegations of corruption in numerous World Bank financed initiatives, the World Bank is indeed a poor role model of governance for any multilateral institution.
Reconstructing the Public Domain
The ADB has identified four elements of good governance for its purposes: Accountability, Participation, Predictability and Transparency. All four elements are operationalised by policy and sectoral reform programmes that promote private sector needs over public interest priorities. For example, “The litmus test [for Accountability] is whether private actors in the economy have procedurally simple and swift recourse for redress of unfair actions or incompetence if the executive authority.” And, “Access to accurate and timely information about the economy and government policies can be vital for economic decision making by the private sector.” Predictability is about developing legal frameworks, especially to support private sector development.
The ADB claims that its “bread-and-butter business” is assisting the public sector in DMCs. This assistance is geared primarily towards the reform of public enterprises, with a concomitant process of reconstructing an “appropriate” role for the State in a market-friendly economy. Maximising profits, minimising costs, preserving markets, market-friendly economic reforms, promoting market mechanisms in the provision of services, competitive operating environments, enhanced cost recovery, divestiture and privatisation, are the main concerns that guide the ADB’s assistance to the public sector, and the operationalisation of the ADB’s elements of good governance.
The ADB’s governance policy is vehicle for entrenching sectoral reform and reconstructing the public domain. It is also fundamentally contradictory. While the Bank claims to eschew involvement in political aspects of governance, its core mandate—promoting economic development—is a deeply political phenomenon. Economic development plans determine the distribution of a society’s wealth, opportunities and challenges, who gains and loses, and how power is realigned or entrenched. It is both delusional and self-serving for the ADB to project that the political and economic dimensions of governance can be separated in policy and reality.
The ADB’s policy on good governance offers no prescriptions for its own institutional governance. Accountability, Participation, Predictability and Transparency are the buzzwords for governments, but appear not to apply to the ADB’s own conduct or operations. ADB insiders have revealed that the institution is increasingly plagued by poor and irresponsible performance by Bank staff and Management, and a lack of clarity about its own operational policies and procedures. Questions have been raised in meetings of the ADB’s Board of Directors about the appropriateness of Bank conduct in formulating, processing and implementing projects. Controversies surrounding a number of ADB projects and programmes–from the Chashma Canal Project in Pakistan to reform programmes in the Pacific Island States—reveal that the ADB’s commitment to good governance is at best a lie and at worst, antagonistic to nationally meaningful and accountable governance structures and mechanisms.
Evidently, there is a lot for the ADB to learn and acknowledge about the implications of its specific version of governance. The ADB is well advised to clean its own house and demonstrate its accountability to citizens and their governments before imposing its version of governance on the people of the region.
*Shalmali Guttal is the Coordinator of the Micro-Macro Issues Linking Programme at Focus on the Global South ([email protected]).